Mortgage Terminology

An amortized loan includes regular periodic payments of both principal and interest, that are paid within the term of the loan. Amortization schedules detail the monthly payments and how much of each payment goes to principal and interest.

All the income you've earned over a the year in wages, salary, tips, bonuses, commissions, and overtime amount to your annual income. In the case of mortgage applications, lenders primarily focus on income through wages or salary.

When you apply for a home loan, your lender will require that an appraisal is done on the property. This process involves assessing the value of the home through an inspection and by comparing it to similar real estate in the area.

The annual percentage rate is the cost of borrowing money from the lender, shown as a percentage of your mortgage amount. The APR includes the interest rate as well as all other fees that are paid over the life of the loan.

Declaring bankruptcy means that you have submitted an application to a court that admits you are unable to pay back your debts. Filing for bankruptcy ruins your credit, which leads to problems when applying for loans in the future.

A mortgage borrower is someone who takes out a home loan to purchase a property. When that person borrows the money, they are making a commitment to pay back that amount in full, on time, and with interest.

Closing checklists are important to keep track of all the items that need to be taken care of prior to closing. It lists everything from the payments that need to be made to the documents that need to be signed.

Closing costs involve all the fees and costs that need to be paid before or at the time of closing. Your mortgage contract and disclosures go over all the costs that will be incurred by you as the buyer, the seller, and the lender.

Out of the numerous documents that you will come across during the mortgage process, your Closing Disclosure is one of the most important. This 5-page document specifies the terms of your home loan, such as your monthly payments, interest rates, and closi

By having co-borrowers join your loan application, their income, assets, and credit score can help you qualify for a loan and get lower interest rates. Co-borrowers are equally liable to pay back the loan.

A co-signer can help you qualify for mortgages by signing the loan application with you. Co-signers have no interest in owning the property, but their credit score, income, and assets will count towards getting you a lower interest rates.

When applying for a mortgage, lenders will be looking at your credit history, which is a compilation of your borrowing and payment habits. It shows the lender how likely you are to repay the loan they grant you.

The FHA sets credit requirements that you must meet if you are to qualify for a government-backed home loan. In order to use the 3.5 percent minimum down payment option, you must have a FICO score no lower than 580.

The down payment on your house is the amount you pay the lender upfront in order to secure the loan. The amount differs based on what you can afford, and the loan requirements that vary according to the lender.

A major hurdle people face when trying to buy a home is saving up for the down payment. To help overcome this issue, there are down payment assistance programs that provide homebuyers with grants that go toward the up front and closing costs.

To become eligible for an new FHA mortgage or an FHA refinance, there are certain criteria you'll need to meet as a borrower. When it comes to a borrower’s eligibility, the FHA loan program offers a lot of flexibility.

Fannie Mae is a government agency that buys mortgages from lenders in order for them to reinvest their assets. Its mission is to stimulate the secondary mortgage market in the U.S. and increase availability of low cost housing.

FHA home loans have a set of rules and guidelines which participating lenders need to follow in order for loans to be insured by the US government. These rules are collected in a single reference book called HUD 4000.1.

The FHA One Time Close Construction-to-Permanent Loan is a secure, government-backed mortgage program available for one-unit stick-built primary residences, new manufactured housing for primary residences (no singlewides), and modular homes.

You have the option to refinance your home through the same or a different lender, in order to replace your current mortgage with a new one that offers lower interest rates, or to borrow cash against your home's equity.

The FHA has guidelines that applicants must meet in order to be approved for a government-backed loan. The FHA requirements are set and managed along with the U.S. Department of Housing and Urban Development.

Your FICO score is a number that represents your creditworthiness. One of the most widely accepted credit scores, this number comes from an algorithm developed by Fair, Isaac and Company in the 1950. FICO debuted as a general-purpose score in 1989.

The U.S. Department of Housing and Urban Development (HUD) sets specific criteria to classify first time homebuyers. This helps lenders properly identify these consumers and consequently allows HUD to track that number annually.

A foreclosure is when a borrowers gives up all rights to his/her home as a result of not making monthly mortgage payments. The foreclosed property is then seized and sold by the lender to recover the loss.

Freddie Mac is a government agency that buys mortgages from lenders in order for them to grant more loans to home buyers. The agency works to stimulate the real estate market and increase availability of low cost housing.

As a homeowner, you have the option to tap into your home's equity and borrow money using it as collateral. This is called a home equity loan, but is also known as a second mortgage since it is in addition to the actual home loan.

As a borrower, you may need to get a home inspection done, where a professional evaluates the condition of the house based on a visual assessment. The report will give you details on any problems with condition of the home.

The HUD-1 Settlement Statement was a document that outlined home loan terms. It was replaced by the Closing Disclosure form as of October, 2015, under the administration of the Consumer Financial Protection Bureau.

When you enter a mortgage agreement with a co-borrower who is equally responsible to repay the loan, it is called a joint loan. Having another credit score and income contributing the loan application can help qualify for a home loan.

A jumbo loan is a mortgage with an amount that exceeds the limits set by Fannie Mae and Freddie Mac. A jumbo loan is a good option if you're looking to buy an expensive, luxury home, can afford a large down payment, and have a great credit score.

Your lender is is the person or institution granting you a mortgage loan. Lenders loan you money to buy a home, with the understanding that you will make regular payments, with interest, to pay off the loan.

To get the mortgage process underway, you have to fill out and submit a loan application to your lender. The application form and its supporting documents are used to determine your eligibility for the home mortgage.

A loan term is the amount of time during which a borrower makes monthly payments towards a home loan. The loan term is subject to change, depending on the borrower's payment habits and possible refinancing of the mortgage.

The loan-to-value ratio compares the loan amount to the actual value of the house. The LTV metric is used to determine the risk of granting a mortgage loan, as well as the mortgage insurance rates and costs that go with it.

In order to qualify for an FHA-approved loan, you will be required to pay a mortgage insurance premium. This insurance protects lenders from incurring a loss in case you are unable to make monthly payments

Monthly payments are made to pay off a mortgage loan. The amount goes towards paying the principal balance and interest, and is determined according to the down payment, term, interest rate and cost of the property.

When shopping for a new home, most people apply for a mortgage in order to finance it. This is a loan that allows you to borrow money to buy the property, and then make monthly payments to repay the debt with interest.

When buying a home, the mortgage closing on a home is the final step in the transaction between you and the seller. This settlement meeting is when property title is handed over to the new homeowner, and funds are transferred to the seller in exchange.

The Home Affordable Refinance Program (HARP) was an initiative put forward during the Obama administration, that offers a number of options designed to help homeowners, depending on their individual circumstances.

​When applying for a mortgage, it’s important to note that the FHA will insure your home loan only if you plan on purchasing or refinancing a property that serves as your primary residence. In other words, an FHA mortgage product is available exclusively.

In the case of conventional loans, you will need to pay for Private Mortgage Insurance. Many lenders require it so that they are protected from huge losses in the event of a borrower defaulting on a mortgage.

At closing, you will receive the property title that states you are the owner of the home you purchased. The title company issues the document as evidence that you bought the property legally, and no one else has claims to it.

A reverse mortgage's loan balance increases over time, because payments are not made until the borrower moves or dies. This is a popular option for seniors, if they are looking to supplement their income.

​A single family home is classified as an individual, unattached dwelling structure. For the purposes of an FHA loan, it is an owner occupied home, which means that the borrower must intend to use the home as their primary residence.

The FHA Streamline Refinance is an option for homeowners looking to lower the interest rate and monthly payments on their existing FHA mortgage. This lets borrowers refinance with a process that is streamlined to cut down on the time and effort spent.

Some lenders grant subprime mortgages to borrowers with low credit scores who don't usually qualify for most other home loans. These loans tend to have very high interest rates to protect lenders in the event that the borrower defaults.

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Common FHA Questions

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